KUALA LUMPUR: Better sequential earnings are expected for Padini Holdings Bhd, supported by consumer down-trading, said Maybank Investment Bank Bhd (Maybank IB).
The research house said Padini's sales momentum post-pandemic is trending upwards with improved product mix and more substantial store footfall driving topline growth.
Padini is also actively monitoring costs to maintain its margins.
"We believe Padini stands to benefit from consumer down-trading if consumer disposable income is stretched alongside higher inflation in the second half (2H) of 2022," it said.
Maybank IB said Padini had undergone a review of its headcount per outlet to reduce operational expenses, which resulted in around a six per cent decline in staff costs year-on-year (YoY).
Padini said that its stores are not operating at total staff capacity yet, given the current retail staff shortage.
"With cost management initiatives ongoing, we believe Padini could partially offset the net impact of the recent minimum wage hike to RM1,500 per month (effective May 1)," it said.
Although sales have not returned to pre-pandemic levels yet, the firm said Padini shared that its fourth-quarter (Q4) financial year 2022 sales during the Hari Raya Aidilfitri festivities were encouraging.
"Store footfall has also significantly improved. Hence, Padini plans to open four to five new stores in FY23.
Meanwhile, the company has begun looking outside China for its product supply (Vietnam is a likely alternative) to avoid further depleting its inventory levels.
"Hence, we keep our earnings estimates, Buy call and target price unchanged at RM4.10 on Padini," it added.